|Weird stuff being floated in the biznes pages these days. Game playing by Seagate or Samsung?|
Samsung May Sell Hard-Disk-Drive Unit.
APRIL 17, 2011, 9:45 A.M. ET.
SEOUL—Samsung Electronics Co. is considering selling its money-losing hard-disk-drive business to raise funds for investment in new growth areas, a person familiar with the situation said Sunday.
Samsung is looking to sell the business for $1.5 billion but might consider a deal under $1 billion because it "is trying to get rid of" the business, the person said.
The most likely buyer for the business is Seagate Technology Inc., the U.S.-based computer-hard-disk maker, the person said.
Calls to Seagate's offices in Asia went unanswered Sunday evening.
Samsung Electronics, which earlier this month gave weak earnings estimates for the first quarter, is the biggest of the 60 companies that make up South Korea's largest business group.
As the Samsung conglomerate looks for new engines of growth, it said last May that its companies would collectively invest about $20 billion in new businesses by 2020, including $1.8 billion in biopharmaceuticals.
In February, Samsung Electronics said it would set up a health-care joint venture with U.S.-based biopharmaceutical-services company Quintiles Transnational Corp., as part of its move to diversify away from consumer electronics.
A sale of the company's hard-disk business would help generate cash for reinvestment in promising business areas.
The hard-disk, or HDD, industry has been under pressure from the success of sales of Apple Inc.'s iPad and other tablet computers, which store data on flash-memory chips rather than on magnetic disks. The new devices are believed to have hurt sales growth of consumer-laptop computers, which are major users of disk drives.
Samsung, which held around an 11% share of the global HDD business in the fourth quarter of 2010, has been losing money from the business, prompting it to consider a sale.
"Samsung is considering selling its HDD business as it is not strategic to succeed; [Samsung] is neither a follower or a leader in the business and it's making a loss," the person familiar with the situation said.
The person said, "$1.5 billion seems a reasonable price to sell," but added "it could even be sold for under $1 billion as Samsung is trying to get rid of it."
In March, Western Digital agreed to acquire Hitachi Ltd.'s HDD business for about $4.3 billion in cash and stock, a deal that created a dominant player with a nearly 50% market share. Seagate accounted for 29% of HDD shipments in the fourth quarter of 2010, according to research firm iSuppli.
Samsung Electronics, the world's biggest maker of memory chips and liquid-crystal-display televisions, has seen its earnings decline in recent quarters.